Court Should Reverse Decision That Harms Retirement Investors

Consumer advocates and the Obama administration spent nearly six years crafting the fiduciary rule, which was created to address the changes over the past four decades in how people save for retirement. When the previous regulations were issued in 1974, IRAs, 401(k)s and other similar accounts were either brand new or did not exist. Since individual retirement plans are largely replacing traditional pension plans, more investment decisions are falling on workers, who need reliable advice.

When seeking help with retirement planning, individual investors can’t be sure their advisers don’t have financial conflicts. Some advisors are professionally obligated to follow the “fiduciary standard,” which means they legally have to put the consumers’ financial goals first. Many other financial professionals, however, such as brokers, only have to meet a lower standard that makes it possible for them to collect additional fees and commissions at the expense of their clients. A 2015 report by the White House Council of Economic Advisors found that these hidden fees and conflicts of interest cost IRA investors alone about $17 billion dollars per year.

Despite widespread concerns about such practices, the Fifth Circuit panel ruled that Congress, not a federal agency, needs to address these issues. But in its motion, AARP says that the court panel’s decision “robs workers, retirees and their families of crucial protections for their retirement investments.”

The chief judge for the Fifth Circuit wrote the dissenting opinion in the March ruling against the fiduciary regulation, something that could bolster AARP’s request for intervention and rehearing by the full court. The panel’s decision is also at odds with other recent federal court rulings upholding the fiduciary rule.